Telecom Stock Roundup: Altice Completes Cheddar Buyout, Ciena's Q2 Results & More

In the past five trading days, telecom stocks flattered to deceive as an initial uptrend was replaced by a steady decline, as the Trump administration decided to up the ante against China, buoyed by the self-declared victory against Mexico. The stocks went on an initial flurry as the U.S. government dropped plans to impose 5% tariff on all Mexican goods after its Mexican counterpart promised to step up measures to stem the flow of illegal immigrants. However, the Sino-U.S. trade war continued to brew with no visible respite in the near term as both countries remained firm in their positions.  

Riding on the success of the coercive tools employed against Mexico, Trump asserted in his usual rhetoric that the United States would look forward to imposing higher tariffs on additional import items to bring the communist nation back to the negotiating table. Although a meeting between the two state heads is likely to take place at the G20 summit, any probable solution is unlikely to be reached in a one-off interaction. China has even warned that it is ready to fight a prolonged tariff war and would retaliate if the United States goes ahead with a fresh tariff regime.

Meanwhile, the technology warfare between the two nations, with Huawei at the centerstage, took a fresh turn as the White House Office of Management and Budget informed the Congress that it would abide by a two-year deadline to ban federal contracts of companies that continue to deal with the Chinese smartphone manufacturer. Despite a cumbersome process that involves third-party suppliers and contractors, it pledged to enforce the multifaceted push against Huawei to safeguard national interests.  

The industry suffered another blow when attorneys from 10 states filed lawsuits to prevent the proposed merger of T-Mobile US Inc. TMUS and Sprint Corporation S on grounds that it would lead to a monopolistic market. The lawsuits are likely to further delay the merger that is already stuck in regulatory clearance, leading to uncertainty within the sector. However, the industry had something to cheer about when the Federal Communications Commission gave a legal greenlight to leading carriers to create tools to block suspected spam calls on behalf of their subscribers. The purported move is likely to offer subscribers peace of mind against alleged robocallers that recorded about 4.7 billion calls alone in May 2019.  

Regarding company-specific news, acquisitions, earnings, strategic deals and footprint expansion primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.     Altice USA, Inc. ATUS recently completed the acquisition of Cheddar Inc., a live streaming financial news network, to augment its presence within the news domain. With this strategic buyout, Altice extended its portfolio of high-quality news coverage across digital, mobile and linear TV formats.

Cheddar perfectly complements Altice’s hyperlocal and global news offerings that include the most watched news channel in the Optimum footprint News 12 Networks, and international and current affairs news network i24NEWS. The combination of Cheddar and Altice businesses will likely offer more opportunities for collaborative and complementary programs, thus fortifying its presence in the cut-throat news market. (Read more: Altice Concludes Cheddar Buyout to Extend News Footprint)

2.    Ciena Corporation CIEN reported solid second-quarter fiscal 2019 (ended Apr 30, 2019) results, wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate, and increased year over year. The performance was driven by market share gains on the back of technology leadership and diversified customer base in high-growth markets.

Adjusted net income came in at $76.2 million or 48 cents per share compared with $33.8 million or 23 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 8 cents. Quarterly total revenues increased 18.5% year over year to $865 million, primarily driven by higher product sales. The top line surpassed the consensus estimate of $816 million. (Read more: Ciena Q2 Earnings Beat Estimates, Revenues Up Y/Y)

3.   ADTRAN, Inc. ADTN has inked an agreement with ATC Communications, a family-owned rural local exchange carrier in Central Nebraska, to offer its SmartRG end-to-end network management solution to improve the broadband connectivity of the latter.

ADTRAN will deploy the SmartRG full suite of software for ATC, including SmartRG Device Manager and SmartRG Smart Analytics. SmartRG Device Manager enables safe and remote configuration of network, utilizing a secure cloud-based deployment, while SmartRG Home Analytics facilitates operators to receive real-time and historical analysis of home network connectivity issues, with data collected directly from customer premises equipment. (Read more: ADTRAN SmartRG Devices to Power ATC Communications Network)

4.     Zayo Group Holdings, Inc. ZAYO has augmented its presence in Ohio with the expansion of the company’s fiber network infrastructure in the region. The strategic move will enable the company to provide high-quality connectivity in order to support the seamless transition of enterprise and mobile carrier customers to 5G technology.

The network expansion will add about 300 new route miles for Zayo in the Youngstown and Akron area, and complement its existing networks. The expanded network is expected to benefit regional business and enterprise customers with superior bandwidth facility for data-intensive content, streaming services and IoT applications. The densification of the fiber network will further help the company offer improved long-haul connectivity throughout the state, including the Cleveland/Akron/Pittsburgh corridor. (Read more: Zayo Boosts Ohio Footprint Through Fiber Network Expansion)

5.     AT&T Inc.’s T advertising and analytics division Xandr recently unveiled an ad-buying platform, Xandr Invest, per Reuters. The latest move is aimed at attracting advertisers with exceptional access to the telecom behemoth’s customer data, while facilitating businesses to purchase ad space across varied formats.

Xandr Invest is aligned to merge AT&T’s two different buyouts — media company Time Warner and ad technology company AppNexus — to grow its business beyond a wireless service provider. The platform includes an offering named programmatic guaranteed, which will likely enable advertisers to reserve ads on premium content that may have limited supply. (Read more: AT&T Brings Xandr Invest to Expand Advertising Footprint)

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and during the past six months.

In the past five trading days, Qualcomm was the biggest gainer with its share price increasing 3.7% while Sprint was the biggest decliner with its stock down 6.6%.

Over the past six months, SBA Communications has been the best performer with its stock appreciating 24%, while Juniper was the sole decliner with its shares falling 3%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average decline of 0.8% while the S&P 500 rallied 9.8%.

What’s Next in the Telecom Space?

In addition to product launches and deployment of 5G technologies, all eyes will remain glued to how the United States and China counter each other in the tit-for-tat tariff war and its spiraling effect on the industry.

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